Tandberg Data

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Press Release

Tandberg Data Presents Q4 2008 Results

February 12, 2009

Category: Tandberg Data - AMERICA



  • Positive EBITDA for the quarter

  • Total revenues of $36.6 M

  • Total gross margin of 31.0%

  • Operating expenses down by $3.4M compared to Q4 2007

  • Annualized cost reduction in operating expenses $16M has been achieved

Balance sheet and Cash Flow

  • Equity ratio of 13.0%

  • Cash balance of $6.9M


  • Acquisition of TST

Outlook for 2009

  • Revenues of $140M-$160M

  • EBITDA of $8M - $12M

  • Improvement of gross margin

  • Continued reduction of operating expenses

Financial Review

As a result of the acquisition of Tandberg Storage ASA, Tandberg Data owns 84.54% of the shares as of December 31, 2008, hence the 2008 P&L numbers include Tandberg Storage numbers starting November 25. Additionally, the balance sheet of December 31 includes Tandberg Storage numbers.


Tandberg Data generated revenues of USD 178.4 million in 2008, a decrease of USD 15.0 million compared to 2007.

Gross margin

Gross margin in 2008 was 26.9 percent compared to 26.1 percent in 2007. The increase in gross margin percentage was largely due to a favourable product mix. A significant portion of the decrease in revenues occurred in lower margin product categories.

Operating expenses

Operating expenses were USD 48.7 million in 2008, compared to USD 56.8 million in 2007. The reduction is a direct result of the restructuring plan implemented in the beginning of 2008, which we started seeing significant impact of in Q2 of 2008 and further impact in Q3 and Q4. Additionally, the company incurred approximately USD 0.2 million of restructuring expenses in the fourth quarter 2008, which are included in the operating expense numbers.


Ordinary depreciation and amortization of fixed assets and product development totalled USD 12.1 million in Q4 of 2008 compared to USD 21.4 million in Q4 of 2007. The decrease is directly related to the decrease in Technology and Development on the balance sheet (see Balance Sheet in “Condensed Consolidated Financial Statements” section for more detail).

Net financial items

Net financial items were negative USD 7.1 million in 2008 compared to USD 10.4 million in 2007. Most of the improvement is a result of exchange rate changes and reduction in financial expenses due to lower interest bearing debt.

Profit before tax

Loss before taxes in 2008 amounted to USD 29.2 million compared to a loss of USD 44.4 million in 2007. The decrease in loss compared to 2007 is due to lower operating expenses, lower depreciation and lower net financial items.

Balance Sheet

Total assets decreased by USD 22.4 million, from USD 93.8 million at the end of 2007 to USD 71.4 million at the end of 2008.

The Cash balance at the end of 2008 was USD 6.9 million compared to USD 6.1 million at the end of 2007. See section on ‘cash flow’ below and the cash flow statement for more details.

Inventory at the end of 2008 was USD 16.7 million, a decrease of USD 6.4 million compared to 2007. The decrease was partly due to better inventory management and partly due to write-downs of inventory.

Trade accounts receivables at the end of 2008 were USD 28.5 million, a decrease of USD 4.6 million compared to the end of 2007.

Non-current assets at the end of 2008 were USD 17.3 million, a decrease of USD 8.3 million compared to 2007. The decrease was mostly due to write-downs of R&D done in 2008.

Current liabilities amounted to USD 43.9 million at the end of 2008 compared to USD 67.3 million in 2007. The decrease is mostly due to lower interest bearing debt and other current liabilities (see note 5 to the financial statements for more details on interest bearing debt).

Non-current liabilities amounted to USD 19.0 million at the end of 2008 compared to USD 29.9 million in 2007. The decrease compared to 2007 is due to the conversion of debt and partially repayment of the Cyrus Capital loan as a result of the stock issue in April 2008.

Equity amounted to USD 9.3 million at the end of 2008 compared to USD -3.4 million in 2007. Several factors affected the change in Equity. The equity at 2007 year end was negative USD 3.4 million mostly due to the write-down of Goodwill and net losses. Since then, further net losses have been offset by the conversion of bond loan into equity and share issue. See financial statements for more details.

Cash flow

The company’s net change of cash was positive with USD 0.8 million as of December 31 2008, compared to negative USD 1.3 million during the same period in 2007.

The cash flow from operating activities was negative USD 10.1 million YTD 2008 compared to negative USD 16.5 million YTD 2007. The cash flow from investing activities was negative USD 0.6 million YTD 2008 compared to negative USD 2.8 million in the same period in 2007. Net cash flow from financing activities was positive USD 11.5 million YTD 2008 compared to positive USD 18.1 million YTD 2007.

The cash balance at the end of 2008 was USD 6.9 million, compared to USD 6.1 million at the beginning of 2008.

Market and products

Regions and customers

Sales to Original Equipment Manufacturers (OEM’s), or companies that purchase Tandberg Data products to embed or sell under own brand, amounted to USD 13.6 million in the fourth quarter, which is a decrease of USD 9.8 million from the same quarter last year. Sales to OEMs generally have lower margins than sales through distributors.

The OEM sales’ relative share of total revenue of 37.1 percent in Q4 2008 was 11.8 percentage points lower than the 48.9 percent share in Q4 2007.

Sales through distributors amounted to USD 23.0 million in Q4 2008, which is a decrease of USD 1.5 million compared to Q4 2007.

The relative share of distributor sales of the total revenue was 62.9 percent this quarter, up 11.8 percentage points from 51.1 percent in Q4 2007.

Sales in the Americas decreased USD 9.4 million from Q4 2007, mostly on the OEM side.

In Europe, Middle East and Africa (EMEA), revenues in Q4 2008 were down USD 3.2 million compared to Q4 2007, comprised of USD 2.4 million in distributor sales and USD 0.8 in OEM sales.

For the Asia Pacific (APAC) region, revenues were up USD 0.9 million from Q4 2007.


In recent years Tandberg Data has continued to focus on providing data protection solutions with the product categories of individual tape drive devices, automation products media and disk based solutions. The fastest growing product group is the Disk Based group where the RDX Quikstor® licensed technology that was launched at the end of Q3 2006 is proving to be a continuing success. The disk based group made up 23.1 percent of total revenues in Q4 2008 compared to 13.4 percent in the same period in 2007. Total revenues from RDX in Q4 2008 are up 31.9% percent since Q4 last year. The RDX® QuikStor makes up the vast majority of the Disk Based product group in the table above.

The largest product group is tape drives, which made up 34.8 percent of the revenue in Q4 2008 compared to 49.7 percent in Q4 2007. The revenues from automation products made up 14.87 percent in Q4 2008 compared to 14.4 percent in Q4 2007. Revenues from media made up 20.8 percent in Q4 2008 compared to 22.5 percent in Q4 2007.

Tandberg Data shipped its 100,000th RDX QuikStor unit, its removable disk system, in November 2008, less than 2 years after the introduction of the technology.

Added to this Tandberg Data shipped over 300,000 cartridges protecting over 40 petabytes of data within the same timeframe.

The RDX QuikStor is a disk based removable storage system with portable cartridges that offer rugged, reliable and convenient backup, ideal for the SMB market. It combines the benefits of tape -- reliability, portability, archive life, and low cost -- with the performance, speed, random access, and ease of use of hard disk technology.

Market update

The data storage market sector continues to be a growth sector. Critical data and regulations around retention of data fuel solid growth in this market worldwide. However, the recent global economic issues have slowed sales somewhat and the ongoing impact of those issues is hard to predict.

As previously communicated, tape remains a core technology in the data protection strategies of many enterprises. Although the total tape drive market is not predicted to grow in market size, the sections of the market where Tandberg Data has its focus are expected to grow and Tandberg Data’s products are positioned to take advantage of this growth. The markets currently addressed by Tandberg Data are the tape drive, tape automation, tape media and removable hard disk drive markets.

Business enterprises are under increased pressure to reduce backup times while accelerating access time to data. This development has paved the way for the trend towards increasing sales of disk based solutions as these solutions provide faster backups.

The trend towards increasing sales of disk based solutions was maintained throughout 2008. Data growth coupled with shrinking back-up window continued to be the main driver. Tandberg Data’s removable disk solutions – the RDX QuikStor® – continued to take volumes from mature technology in the low end and in segments which currently do not take back up due to high costs in backup solutions.


Tandberg Data designs and markets products that are widely accepted by large OEM and channel customers worldwide. Tandberg Data intends to enhance the current tape and disk offerings by adding service and software products. Customers in some circumstances want to have ‘solution’ offerings and by adding the right service and software we will achieve that. By focusing on service, we will be developing an opportunity to increase our value to our customers and open up the opportunity for renewable revenue streams into the future. We see a relative increase in sales through distributors in 2009 which is a continued trend from 4Q08 contributing to a higher gross margin than sales to OEMs.

2008 has been the year where Tandberg Data focused on both a financial and operational restructuring. The board of directors and management have set high goals which have mostly been achieved.

The cost reduction program introduced by the management, which targeted an annualized cost reduction of USD 16.0 million, has been implemented. Q408 operating expenses show that the company is on plan. Most of the reduction initiatives were completed in 2008 and we budget for further cost reductions 2009.

Revenues declined from the first half of 2008 from USD 101 million to USD 78 million in the second half. This is a result of the global economic crisis to a large extent but was also caused by a fall in sales due to quality issues inherited from the acquisition of Exabyte in 2006. After all 2008 revenues were only 10% down on 2007. Due to the global economic downturn further Revenue reductions are budgeted for 2009 but increased gross margins and further reductions in cost are expected to more that compensate for this.

EBITDA has improved consistently throughout 2008 with a combination of reduction in operational expenses as well as focusing on increasing the gross margin percent. EBITDA will continue to improve through 2009.

The acquisition of Tandberg Storage ASA in November 2008 led to restructuring expenses and higher operating expenses in Q4 than would otherwise have been the case. However it also improved the gross margin percentage as a result of lower manufacturing and component costs.

Margins have grown very well through 2008 and should continue to grow during 2009 with a combination of selling the right mix of products as well as the introduction of new offerings such as disk systems, software and service during 2009 and finally our sales channels and customers continue to be one of our core strengths.

We anticipate significant continued growth on RDX sales.

In the Q3 report we announced that the existing secured bond loans last instalment of USD 8.45 million (Cyrus Capital ) with maturity date 31 December 2008 (plus 10 working days grace period) would need to be refinanced as this could not be paid out of cash flow. The original USD 23 mill. loan agreement with Cyrus, signed in June 2006, had a 4 year repayment period. Due to Tandberg Data not having been able to comply with loan covenants the company has had to pay relatively high waiver fees and accept accelerated repayment schedules.

Through the autumn and up to January 2009 a number of banks, other finance institutions and lenders were approached with a view to refinance the Cyrus loan. The global financial crisis contributed significantly to the financial institutions unwillingness to lend. In addition the company experienced tighter credit terms from some of the strategic suppliers and delay in payment from certain customer causing increased stress on the company’s cash. Unfortunately the Cyrus loan therefore could not be refinanced and paid 31 Dec 2008.

As per a Press Release of January 29, 2008, Cyrus Capital and the company following negotiations had agreed to extend the maturity of the loan until March 31, 2008.The Cyrus Loan Amendment Agreement contains specific requirements, here under conversion of unsecured bond loan debt into share capital, of both Tandberg Data and Tandberg Storage, certain fees and warrants to Cyrus, and a minimum NOK 125 mill, maximum NOK 175 mill share issue to be completed before 31 March 2009 plus certain conditions precedent.

The proceeds of the planned rights issue in March 2009, in addition to repaying Cyrus, will strengthen the working capital and make acquisitions possible. Subject to the financial restructuring being completed as planned, Tandberg Data consolidated will have a rather strong balance sheet with around USD 4 mill interest bearing debt left only and 60%+ equity percentage.

The board and management of the company are satisfied that the plans to achieve sustainable profitability through the global economic downturn are in place.

This report contains forward looking statements. These statements are based on various assumptions, many of which are based, in turn, upon further assumptions, including Tandberg Data management’s examinations of historical operating trends. Although Tandberg Data believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Tandberg Data cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Oslo, February 11, 2009

Board of Directors

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